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Why 4,000 Riels doesn’t always equal $1

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Consumers and business owners in Cambodia alike always face a dilemma of whether to pay in Riel or US dollar and the appropriate applicable exchange rate for their daily regular transaction. Despite a stable market exchange rate between the 4,000 to 4,100 range within the past decades, business owner still often undecided on one consistent exchange rate to apply but instead choose to adjust the applicable rate at their discretion in their favour and often to the detriment of their customers. In order to cover risk of exchange rate movement, business owner who prefer to transact in dollar often mark up the applicable exchange rate while those that prefer to transact in Riel does the opposite. This led some consumers to resent being put in a position of disadvantage as market rate is often somewhere in between. We asked owners of these businesses to find out their reasons. Vann Seakleng, a coffee store owner in Takmao City, Kandal province, sets the price tags for his menu in Khmer Riels to promote the use of the local currency and to keep transactions simple.

“I have always set my prices in riels. If customers want to pay me in US dollars, I will not round up according to the current exchange rate. By doing so, hopefully, my customers will start using riels when they come to my shop,” Seakleng says. “If they pay me in US dollar, they will lose out on the exchange rate because my menu sets $1 to 4,000 Riels. My shop keeps the difference.”

Umchea Sophea, a fellow coffee store owner in the city, shares the same opinion, saying, “I want customers to pay in riels. So, I set my price tags in the local currency to encourage its use. If they do not want to lose out on the exchange rate, they will have to pay me in riels. Alternatively, if they do have US dollars, they can go to any local money exchange and exchange before spending at my store.” Meanwhile, there are alternative views in the hospitality industry. Soeum Ratha, owner of the Holiday Guesthouse in Battambang province, says that not applying the 4,000 riels to $1 exchange rate can affect the customers’ sentiment.

“Based on the current exchange rate, $1 is worth more than 4,000 riels. But I feel if I was to charge customers the 4,050 riels or 4,100 riels market-exchange rate, some customers may not be happy. They may feel my business is unfair and stop coming,” Soeum says. “So, I apply the same exchange rate consistently. Whether they pay me in riels or US dollars, $1 will always equal 4,000 riels in my business. It also does not affect my business because I have already included the margin into my price.” Treav Raskmey, the owner of Natafe Restaurant on Koh Pich Island, says that using the 4,000 riels to $1 exchange rate can result in losses for his business and he is considering setting his own standard price of either 4,100 riels or 4,200 riels. He reasoned that a fixed conversion rate offers a simple way to deal with fluctuations.

However, for vendors of small items like Rin Sereth in the Thmorkol district of Battambang province, she adjusts her exchange rate in accordance with the market rate of the day.

“If a customer buys a $1 top-up card, they have to pay me 4,100 riels or 4,200 riels. I charge them over the market rate because I want to make sure when the exchange rate changes, I will not lose,” she explains. “This is the same for most of the other vendors that sell beers, soft drinks and top-up cards like me.”

Sareth adds, “I don’t want to do this but I have no choice. This is because I also have to spend other currencies like Thai Baht when buying products like beer or soft drink imported from Thailand.”

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